After a long career at Barron's, I joined Forbes as San Francisco bureau chief in December 2010. I've been writing about technology and investing for more than 25 years. With the Tech Trade, I've picked up where I left off when I was writing the Tech Trader Daily blog at Barrons.com. When I'm not working, you can find me riding my road bike around the Bay Area hills, managing my fantasy baseball team, rooting for my beloved Phillies and Eagles and hanging out in the Valley with my family. You can follow me on Facebook, on Twitter (@savitz), and on Google+.

Finisar: Jefferies Cuts Rating; Sees Cisco/Lightwire Threat

Finisar shares are trading lower this morning after Jefferies analyst James Kisner cut his rating on the stock to Hold form Buy, with a new target of $22, down from $24. In particular, he sees a new competitive threat from the recent announcement that Cisco plans to buy the startup Lightwire.

“Our checks suggest that investors may currently underestimate the potential risks posed by the recently announced acquisition of Lightwire by Cisco,” Kisner writes. “Given this incremental risk and a valuation that is no longer particularly compelling, we’re downgrading Finisar shares. At this point we’d rather see investors rotate into JDSU given its relatively greater exposure to rebounding service provider capex.

The analyst writes that his discussions with industry contacts suggest that Cisco plans to launch proprietary interfaces for high speed interconnects using Lightwire technology by July 2013. “Our checks suggest that this technology is potentially very disruptive, reducing the cost of 100G solutions by 90% while increasing platform density,” he writes. “We estimate that only 5-10% of Finisar’s current revenue is at risk as a result of the Lightwire acquisition, but we’re concerned that this portion of Finisar’s revenue stream is among the fastest growing.”

Kisner inches up his EPS forecast for the April 2012 fiscal year to 91 cents, from 90 cents, but he cuts FY 2013 to $1.45 a share from $1.60.

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